TRADING UP: Major trading houses investing in ship-owning again

This week has been marked by Vitol’s order for up to eight 84,000-cbm gas carriers. The two-option-six VLGCs will be built for the trader at HHI at a speculated cost of $75m per vessel.

The two firm ships will arrive in 2019. Three suezmaxes will also be delivered later this year from Sungdong. The order is part of a wider structural story that has been developing in the last two months orso: major trading houses are beginning to invest in shipowning again. Mercuria Energy was perhaps the first to get the ball rolling in February, when it purchaseda secondhand VLCC from DHT for $19.1m, which marked the energy trader’s first venture into shipowning. Some traders have been more gung-ho than others.

In early June, Trafigura announced plans to build 32 new crude oil and product tankers as part of a partnership with China’s Bank of Communications. The ships will be built in both South Korea and China at an estimated cost of over $1.35bn. The last time Trafigura added to its owned fleet was in 2013, when it acquired three MR tankers.Gunvor, via its shipping subsidiary Clearlake, has taken a more conservative approach and in mid-July announced a two-vessel tie-up with TopShips. The two companies will co-own two50,000-dwt MR product tankers as part of a joint venture. The ships are currently under construction at Hyundai Vinashin and upon delivery will each be chartered to Clearlake forthree years, with options for two more. The last time Gunvor bought any new vessels was in 2015, when it purchased four small tankers. So why is now the time for traders to invest? Forone thing, commodity prices have rebounded since 2015, when they reached their lowest level since the financial crisis. Traders consequently have more cash to play with. Meanwhile, the prices of second-hand vesselsand newbuildings remain low, particularly for tankers. As a very rough estimate, a tanker order placed today would cost around 20% less than one placed in 2014. The picture is more complex in the dry market, with more divergence in asset values between the different segments, but we’d roughly estimate that acapesize ordered today would cost you around 30% less than in 2014.

Owning – or co-owning – vessels also gives traders an increased ability to predict, plan and manage the cost of their seaborne logistics and gives them a degree of insulation fromthe volatility of freight markets.